It is indeed a great honor to be delivering the Taro Takemi Memorial Oration at the 24th CMAAO Congress. You will all agree that President Taro Takemi was an extraordinary leader. He not only served the important post of the President of the Japan Medical Association for 25 wonderful years but also left an indelible mark in the Asia Pacific and the entire world as an enthusiastic visionary for a better future for not only our profession but for humanity in general. Dr. Taro Takemi's profound belief in "respect for human life and promotion of professional freedom" and his passionate efforts to continuously advance these vital causes were a source of endless inspiration for all of us.

To me, he was also a perfect role model and advisor on the high standards of ethics and responsibilities I should adhere to as the President of my own country's medical association. His wise and insightful opinions on numerous challenges faced by the profession were invaluable to me, as I sought solutions for complicated situations. Because Japan and Korea share many similarities in their medical systems and environments, President Takemi's advices on common issues were particularly helpful to me in fulfilling my responsibilities as the President of KMA.

Obviously, I am not the only one to hold Dr. Takemi to such high esteem. I once met the former Korean Ambassador to Japan, Jung-yum Kim, who had previously been the Chief Secretary to Park Chung-Hee, former President of the Republic of Korea. When I met Ambassador Kim in Tokyo, he told me how he deeply admired the powerful influence President Takemi commanded in Japan and how he had wished to have arranged a meeting between Dr. Takemi and President Park when Dr. Takemi had visited Korea. He said that a person as important and respected as Dr. Takemi should have been received with far greater recognition and ceremony during his visit to Korea. I later found out after observing the Japanese society that even though Dr. Takemi, due to his position, inevitably had to engage in numerous conflicts with politicians, journalists, businessmen and labor leaders who had different views on health policy, he never lost their respect despite difference of opinion.

As the President of the WMA, he attracted immense attention by introducing a new logic for distribution of medical resources. Even though he was energetically involved in many international bodies, the CMAAO always had a special place in the warm and caring heart of Dr. Takemi, who was one of the key founders of this institution. Recalling how his leadership enabled the smooth launch and continued expansion of the CMAAO, I can only offer words of humble and sincere gratitude to our special leader.

Now, after paying that much deserved tribute to Dr. Takemi, I would like to go into the main theme of my oration, which is the Progress and Problems of Health Insurance program in Korea.

Personally, I started to see the need of a medical insurance system for Korea in the 1970s as I served as a member of the National Assembly. At that time, due to the absence of a modern medical insurance system, not only the patients but also the medical doctors in Korea were suffering from the economic burden that stood as an obstacle between decent medical care and patients. I deeply believed that the introduction of a medical insurance system would be essential in dismantling this wall which stood between the patient and medical institutions. Even though the number of medical doctors was to obviously increase with the development of the nation, the inevitable rise in medical expenses triggered by medical advancements may rather lead to a decrease in ratio of doctors to the number of patients who could afford to seek professional medical help. This would have been the total opposite of what we were trying to achieve through medicine. I had actually submitted a written recommendation to the President of Korea about introducing a medical insurance program.

Meanwhile, the Korean government succeeded in opening a breakthrough for the nation's economic growth with its 5-year economic development plan launched in 1960. The continued success of the 1st, 2nd and 3rd 5-year economic development plans resulted in a dramatic economic transformation often described as the Miracle of the Han River. During this national turnaround from a poor agricultural country to a newly industrializing economy, the government realized the need for new social welfare policies. Accordingly, the 4th 5-year plan was expanded to an economic and social development plan to address a broader national agenda.

By the mid-1970's, the Korean government became engaged in an open debate about the need of a medical insurance system. Many emphasized the need for a national medical insurance program as a means of sharing the fruits of economic development with the wider public and as a solution to the ever increasing cost of medical services, which had already started to burden even the middle-income families. At the same time, there were others who voiced concern that the cost of such a social insurance system was simply too much for the nation to bear. In 1970, even after a decade of rapid economic growth, Korea was still a nation with an export of merely 10 billion dollars and a per capita income of only 1,000 dollars. Finding himself sandwiched between such sharply conflicting views, President Park Chung Hee made a bold judgment call. He introduced national health insurance in Korea for the first time in 1977. After an extensive study of various health insurance programs around the world, the Korean government decided to adopt an insurance system more geared towards a market economy rather than the systems adopted by the Western European governments with socialistic policies such as the U.K.

The key highlights of the policy directions were that,

From July 1977, health insurance was introduced starting from workplaces with 500 or more employees located in industrial complexes. In 1988, the scope was expanded to workplaces with 5 or more employees and from 1979 government employees and school employees all became members of health insurance unions. Health insurance coverage was expanded to all farmers and fishermen in 1988 and after a pilot phase, finally Korea's health insurance came to cover all Koreans with the inclusion of 9.89 million self-employed in urban areas as of July 1989.

I was the Minister of Health and Welfare when the coverage scope was finally completed in 1989. I recall how difficult it was to find an appropriate method for identifying the actual income of these urban self-employed, which was critical to calculating the proper contribution for them to bear. At that time, there was great concern that these urban self-employed may enjoy insurance benefits at an excessively low contribution compared to salaried workers whose income is relatively more transparent. In addition, in terms of insurance union finances, while workplace unions had no financial problem and in most cases were able to accumulate a surplus, the insurance unions covering farmers or urban self-employed continued to suffer from shaky financial situations. Still, the rapid roll-out of coverage to the entire nation in just 12 years indicates that the health insurance system in Korea successfully took root with relative speed.

The next major chapter in Korea's health insurance history starts in the late 90's. It was a period of severe turbulence for the health insurance system. There was the shock of the Asian financial crisis and the separation of prescribing and dispensing drugs. The financial situation of the insurance unions further deteriorated. And in July 2000, the individual insurance unions were consolidated into a gigantic single entity called the National Health Insurance Corporation (NHIC). The new organization was borne out of extreme conflict between those in favor of and those against the consolidation of the national insurance system.

Rather than just emphasizing the achievements of Korea's health insurance, I believe that my frank and candid opinion about its problems would be of greater value to the members of CMAAO. I do deeply regret that unfortunately my list of problems is rather long than short.

1) A chronic ailment of Korea's health insurance has been its low benefit coverage ratio. For example, if a patient receives the medical services of a general hospital, he would still have to personally burden about 50% of the medical expense according to the co-payment system. This means that the financial burden for the seriously ill could still be enormously high, even with medical insurance support. To solve this issue of low benefit coverage, the government has plans of lowering the outpatient's burden at general hospitals from the current 50% to 30% from 2008. The consequential problem, however, is how to finance this increased expenditure. The government has announced specific plans for additional financing including a raise of cigarette prices as well as higher contribution rates.

While significantly raising the insurance payment for serious illnesses including cancer, the government plans to increase the contribution rate from the current 4.31% to 5.31% in 2006 and then implement another rate hike to 6.31% in 2008. Despite such plans, there are doubts as to whether these increases would be realistically possible given the recent sluggish economic condition.

In addition, the government currently appears to have no concrete plan in response to the rapid aging of the Korean population and the additional burden this would place on its finances. The situation may become even trickier with the possible launch of a long-term nursing care insurance for the elderly.

The only reason that people's complaints about the limited coverage of benefits have not yet escalated into a burning political issue is because the medical service fee has been kept so low. The government's medical fee schedule does not even decently reflect inflation. Because of this erroneous government policy, many Koreans have come to think that their health insurance card is nothing more than a discount ticket for medical services. Such policies clearly fail to respect both the fundamentals of health insurance and the critical quality aspect of medical services.

2) Blind Spots of Medical Care

Despite the theoretically universal coverage of Korean health insurance, there still remain patients suffering in the blind spots of the system. People who have failed to pay their monthly contributions over a long period of time are denied insurance benefits. As the economy suffers from an extended period of weak growth, late payment or non-payment of insurance contribution has been on an increasing trend recently among the lower income households.

Expanding the coverage of the Medical Aid Program or offering to alleviate contribution obligations could be considered as options. However, these measures would present serious political challenges such as increasing fiscal support to insurance coffers or placing greater burden on the other contributors who pay diligently every month. The complexity of this issue is further aggravated because of the moral hazard factor. For example, the late payment rate has rather gone up since the government announced its plans to lower the burden on those who are delinquent for 3 months or more.

3) Rigidity of NHIC Operation

The National Health Insurance Corporation (NHIC) is a mammoth organization that deals with about 20 trillion won in national medical expenses every year. Unfortunately, several problems have been observed in its operation. It has failed to implement its promised reduction in staff by 2,000 people and has continued to loosely manage its own administrative expenses without taking necessary belt tightening measures. In addition, the president appointed to head such a large and important organization should be a person with qualifying management experience and knowledge rather than a person with political reasons. The conflict between the NHIC labor union and the management also remains as an overhanging concern.

4) Compulsory Designation of the Medical Care Providers

Korea, which lacked experience in social insurance systems, decided to make several compromises to the system for the sake of expanding coverage to the entire population as soon as possible. For example, the compulsory designation of all medical institutions as insured medical care providers was a clear violation of democratic and market economic principles.

The KMA's position on this issue has been that a bilateral contract be signed between the insurers and the KMA, as a representative of the medical care providers. However, there is the legal dispute as to whether the KMA can represent the business rights and interests of all medical institutions as a whole. On the other hand, other interested parties appear to favor changing the compulsory designation into a system where individual medical institutions sign care provider contracts with the NHIC. If this happens, we cannot rule out the possibility of the dispute worsening as a result of the NHIC's arbitrary and oppressive decisions.

5) Low Presence of Public Medical Facilities

In Korea, 85% of all medical institutions are in the private sector. The public sector, including all national and public hospitals and clinics, only accounts for the remaining 15%. This is a dreadful sign of how sparing the Korean government has been in its investment in modern medicine. During the recent Korean history, investments in medicine and public health were often pushed downed the priority list by more urgent initiatives such as fighting poverty, building up the economy and maintaining national defense. Even the limited budget allocated to health was used mostly in the areas of prevention of infectious diseases and maintenance of public health offices.

Even though the ratio of public medical institutions is lowest among many nations that have public health insurance, the government's control over the private medical institutions is by far surprisingly tight. It is also true that the vision and investment for medical development under a liberal democracy and market economy is also insufficient.

6) Low Fee for Service Schedule

My deep concern is that in Korea both the government and the people believe that good medical care is cheap medical care. Unfortunately, they overlook the obvious fact that quality is most important in medical care. Without a certain level of quality, medical care becomes utterly meaningless. The fee schedule was distorted from the very start of the Korean medical insurance system. And this problem has persisted till this day without any improvement.

There were attempts to calculate the so-called actual cost of medical services in order to gain grounds for an objective and fair fee schedule. However, as President Takemi strongly emphasized, the cost of medical service is impossible to calculate. The service provided by our profession is not simple, menial labor. It requires the highest level of skill gained only through numerous years of professional training. How can any one possibly calculate the actual cost it takes to provide such services?

Every year, when the time comes to adjust the fee schedule, KMA braces itself for yet another round of heavy external pressure to accept fees that do not even reflect inflation. The committee responsible for determining the fee schedule has a structure that is unfavorable to the KMA. Both labor union and employer representatives are against fee schedule increases. It appears that the decision-making power lies in the hands of those who do not understand the long-term disastrous consequences of deteriorating medical service quality and financially failing hospitals. The excessive influence of numerous civil organizations on government decision-making is not helping the situation either.

Unless both sides find a mutually acceptable solution, I am afraid that further advances in Korea's medical service cannot be expected. Already, we witness how many young physicians, regardless of their interests or talents, prefer to specialize in fields least covered by national health insurance. Even compared to dentist or oriental medicine doctors, who provide services mostly uncovered by health insurance, medical doctors in Korea have been placed at an unfair disadvantage.

Given the current situation, if Korea adopts a DRG or, even worse, a U.S.-style managed care system, matters may even worsen. There is no chance that a system that failed in the U.S. could manage to succeed in Korea.

7) Quality of Medical Services

The Korean government's attitude towards improving the quality of medical service has been lukewarm at best. The reality of Korea's medical care quality is not satisfactory by all means. According to some surveys, Korean patients have to wait 3 hours for an average 3 minute consultation with a specialist at a general hospital because of the high concentration of outpatients to the larger medical institutions. The overcrowded emergency rooms are another critical issue. However, it seems that the criticism from patients always targets the medical doctors or institutions rather than the government.

To cope with the problem, the system was revised so that patients who did not receive a referral from a clinic or hospital would not receive insurance benefits for their treatment at general hospitals. However, because the fee for treatment is so low, in reality this penalty has not been very effective.

In the past, most of the research or training performed by medical institutions was funded with the profits generated from treating patients. However, since the introduction of the insurance system, this structure was no longer sustainable. Indeed, the Korean government has been contributing to medical R&D funds but this alone has been insufficient. I sometimes feel that we, the medical doctors, are the only ones who care about training and introducing the rapidly advancing new medical technologies.

8) Introduction of Private Medical Insurance

There are already some private insurance products in Korea that provide coverage for co-payment costs, medical services not covered by public health insurance or serious diseases such as cancer. However, the subscription is still limited.

Even though private medical insurance should be encouraged and expanded, the excessive public insistence for unconditional equality in Korea has hampered any definite decision regarding this issue. However, it is my conviction that private medical insurance will be eventually adopted for the sake of improved patient convenience and expansion of better medical service.

9) Various Mindsets and Political Views Regarding Medical Care

The introduction of a health insurance program based on social insurance concepts have triggered a change in the mindsets and opinions regarding medical service. No leader of the medical profession would ever deny the social responsibilities of medical doctors. However, it appears that some people in Korea strongly believe that the best direction for its medical system is the socialist path.

The relationship between the physician and patient has changed and there are some who believe that the true medical care provider is the government or the insurer and that physicians are mere front-line technicians. Such dangerous views appear to be present even among some government officials and insurer employees.

About two years ago, the wife of former Singapore Prime Minister Lee Kuan Yew required emergency treatment for her cerebral vascular condition while staying in the U.K. The agonizing hardship she had to suffer until she received proper medical attention sharply illustrates the still remaining limitations of the medical systems created based on socialist policies of Europe.

I believe that since its introduction in 1977, Korea's health insurance system has developed by adhering to market economic principles. It is distressing to witness more people forgetting the serious defects of the past socialist or communist medical systems.

10) Preparing for the Aged Society

Korea is one of the most quickly aging societies in the world. It also has one of the lowest birth rates. This demographic trend will definitely pose a serious challenge to the financial situation of Korea's health insurance in the future.

The Korean government's plan appears to be to resolve this looming financial crisis by repeating what it did during the 1997 Asian financial crisis: simply cut medical expenditure. Increasing the contribution rate has never been a politically attractive option and the government could always blame the physicians for the increasing medical expenses because the people seem to be relatively insensitive about the quality of medical service.

Aging of the population would inevitably raise medical expenses but many of the elderly would not have the financial ability to afford the doctor's bill. The ratio of people 65 years old or more is currently 8% of the entire Korean population and the share is expected to increase to 14% within the next 10 years. Under the current structure, a financial disaster for both the health insurance and national pension system is only a matter of time. A reasonable long-term government policy to prepare for this pending future is urgently needed but the current government response shows much room for doubt.

Before I end, I would like to leave you with the words of Dr. M. DeBakey, the world renowned American heart surgeon, who was invited to speak at the 1980 CMAAO Congress in Seoul. During his visit, Dr. DeBakey was also invited to the Blue House to receive a Presidential Decoration for his contributions to the world. When meeting the President of Korea, Dr. DeBakey said something that left a very deep impression on me and I would like to share his words with you.

He said that "over several years, I have trained many heart surgeons from all around the world and many of them have returned to their countries to practice what they have learned. Today, in Seoul I visited a hospital where some of these doctors were working and I actually observed an open heart surgery performed by them. It was truly superb and of a high level of excellence. However, the surgeons who received the same training and returned to their communist countries in the Soviet Union or China usually don't reach such levels of excellence." he said.

He went on to explain to the President that "the reason is not that the surgeons from these countries are less talented. Mr. President, the reason is very evident. Science, especially medicine, can only develop under a free environment. Only when the professional freedom of medical doctors is enhanced can the field of medicine develop and patients benefit."

Dr. DeBakey's insightful words and President Takemi's conviction for professional freedom is a source of much needed courage and hope for Korean medical doctors who find themselves often frustrated and discouraged under the health insurance system. Excessive government interference or regulation only harms enhancements in medicine.

Korea needs to learn from its own experience of developing its industries to amazing levels with long-term support and investment. I emphasize that government investment and policy is essential to improved national health and extended life expectancies. In many aspects, Korea's medical system currently faces a critical crossroad.

At this important time, it is fortunate that the CMAAO gathers in Korea for its Congress. I also hope that the CMAAO Congress will provide a valuable opportunity for building stronger cooperation and alliance among medical doctors in the Asia Pacific region and for contributing to enhancements in medicine and health for the people we serve.

Thank you.